Required minimum distributions (RMDs) change the way your retirement income behaves. What once felt like optional withdrawals from your retirement accounts eventually become mandated under federal RMD rules, and that shift can alter your taxable income, Medicare premiums, and long-term tax positioning in Idaho.
For Idaho retirees, the interplay between federal law and state taxes is significant. Required minimum distributions (RMDs) are layered on top of pension, portfolio, and Social Security income. Understanding how RMDs interact with all parts of your financial picture allows for greater control over your overall tax burden.
When RMDs Start and How They’re Calculated
The current RMD age is 73 for individuals born between 1951 and 1959, and increases to 75 for those born in 1960 or later.1 Your first RMD must be taken by April 1st of the year following the year you reach 73. Every subsequent RMD must then be taken no later than December 31st. As a result, Waiting until April 1st triggers the possibility of taking a second RMD in the same calendar year, which can significantly raise reported income.
RMDs are calculated using your December 31st prior-year account balance divided by a life expectancy factor from the IRS Uniform Lifetime Table.2 For example, if age 73 corresponds to a divisor of 26.5 under the updated IRS Uniform Lifetime Table. Dividing a $1,000,000 IRA balance by 26.5 results in a required withdrawal of $37,735.85. That figure becomes your required RMD amount for the year.
Aggregation rules differ depending on account type. Traditional IRAs, SEP IRAs, and SIMPLE IRAs may be aggregated for calculation purposes, allowing one combined withdrawal to satisfy the total requirement.
Employer plan accounts, including most 401(k)s and 403(b)s, must calculate and withdraw separately. This exception for those “still working” is limited to specific retirement plan accounts offered by an employer. To qualify, you must remain an active employee and not hold more than a 5% ownership stake in the company.
Penalty Exposure and Compliance Rules Retirees Should Know
Missing an RMD can trigger unnecessary penalties and paperwork. The following common RMD mistakes deserve close attention:
Missed or Underpaid RMDs: The excise tax penalty was reduced to 25% of the shortfall and may be reduced to 10% if corrected promptly. Form 5329 must be filed with your tax return to report and request penalty relief.3
Inherited Accounts Confusion: Rules for inherited accounts differ from the original owner’s rules. Many non-spouse beneficiaries must withdraw assets within 10 years. Misapplying owner rules to inherited IRAs can create compliance errors.
Roth 401(k) Transitions: Roth employer plans were historically subject to RMDs, though beginning in 2024, designated Roth employer accounts are no longer required to take lifetime RMDs.4 Confusion often occurs during rollovers to Roth accounts, which are generally exempt from RMDs during the original owner’s lifetime.
Managing Tax Brackets Once RMDs Begin
RMD income stacks on top of Social Security, pension income, rental income, and portfolio interest. Federal ordinary income tax brackets range from 10% to 37%.5 As your required withdrawal increases each year, the added income can push portions of your earnings into higher marginal brackets. That shift does not apply retroactively, but it does increase the tax rate applied to your last dollars earned.
Higher income also affects Medicare. The income-related monthly adjustment amount (IRMAA) is a surcharge added to Medicare Part B and Part D premiums based on your modified adjusted gross income (MAGI) from two years prior. Crossing an IRMAA threshold can increase annual premiums substantially.
Idaho taxes most income at a flat 5.3% rate.6 Unlike the federal system, Idaho does not distinguish between ordinary income and capital gains. Every additional dollar of RMD income increases state liability at the same rate.
Managing brackets requires intentional sequencing. You can coordinate partial Roth conversions before age 73 or accelerate income in lower-bracket years to avoid compression later. Withholding directly from RMDs can also help manage estimated payments and prevent underpayment penalties while smoothing cash flow.
Advanced Planning Opportunities Before and During RMD Years
Planning flexibility exists before required withdrawals begin:
Incremental Roth Conversion: Annual partial Roth Conversion decisions can fill lower brackets deliberately before RMDs increase.
Qualified Charitable Distribution: IRA transfers to qualified charities reduce adjusted gross income and count toward annual RMD requirements.
Social Security Timing: Delaying Social Security can reduce early income stacking and preserve bracket space for conversions.
Portfolio Withdrawal Sequencing: Drawing from taxable brokerage accounts before tax-deferred IRAs in certain years can smooth long-term bracket exposure.
RMD Rules for Idaho Retirees FAQs
1. When exactly do I need to take my first RMD?
Most retirees must begin RMDs at age 73 under current law (age 75 for those born in 1960 or later). Your first RMD can be delayed until April 1st of the year after you reach that age, but doing so can force two RMDs in the same calendar year and significantly increase taxable income.
2. What happens if I miss an RMD or take too little?
If you miss an RMD or fail to withdraw enough, the IRS can assess a 25% excise penalty on the shortfall. The penalty may drop to 10% if corrected promptly, but you still need to file Form 5329 and document the fix.
3. Do I have to take RMDs separately from each retirement account?
Traditional IRAs (including SEP and SIMPLE IRAs) can usually be aggregated, so you can take the total RMD from one or multiple IRA accounts. Most employer plans, like 401(k)s and 403(b)s, must be withdrawn separately from each plan.
4. Are Roth IRAs or Roth 401(k)s subject to RMDs?
Roth IRAs are not subject to lifetime RMDs for the original owner. Roth 401(k)s used to have RMDs, but rules changed so designated Roth employer accounts no longer require lifetime RMDs for original owners starting in 2024.
5. How do RMDs affect Medicare premiums?
RMDs increase your MAGI, which can push you into a higher IRMAA bracket. Medicare Part B and Part D surcharges are based on MAGI from two years prior, so a high-income RMD year can raise premiums.
6. Does Idaho tax required minimum distributions?
Yes—Idaho generally treats RMDs as taxable income and applies the state’s flat income tax rate. Some Idaho retirement-related deductions may apply depending on age and the type of retirement income, but most RMDs remain taxable.
Coordinating RMD Strategy With Your Broader Retirement Plan
RMDs are not isolated transactions. They influence taxable income, Medicare premiums, Social Security taxation, and long-term portfolio structure. Viewing them within the full retirement income picture often reveals planning opportunities that aren’t obvious year-to-year.
A thoughtful withdrawal framework can help smooth income across tax brackets and reduce avoidable lifetime tax exposure. Coordinating IRA distributions with other income sources allows retirees to manage both federal and Idaho tax consequences more intentionally.
Our firm integrates distribution strategy into broader retirement income modeling, helping you evaluate timing decisions, bracket thresholds, and cash-flow structure. If you would like to review how your RMD strategy fits into your retirement plan, we invite you to schedule a complimentary, no-obligation consultation.
Resources:
1) https://www.voya.com/individuals/learn/rmd-calculator
2) https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/UniformLifetimeTable.pdf
3) https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
4) https://www.ascensus.com/industry-regulatory-news/news-articles/secure-2-0-act-changes-rmd-rules/
5) https://turbotax.intuit.com/tax-tools/calculators/tax-bracket/
6) https://taxfoundation.org/location/idaho/
This material is provided for informational and educational purposes only and is not intended as personalized investment, legal, or tax advice. The strategies discussed may not be suitable for all individuals and depend on personal circumstances, objectives, risk tolerance, and financial situation.
There is no guarantee that any planning strategy will reduce taxes, avoid penalties, or produce a specific outcome. Tax results may vary based on individual circumstances and changes in federal or state tax laws. Investors should consult with qualified tax and financial professionals regarding their specific situation before implementing any strategy discussed. Examples provided are for illustrative purposes only and do not reflect the impact of individual account structures, tax considerations, or future changes in IRS tables. State tax treatment is subject to change and may differ based on residency, income sources, and legislative updates. Idaho tax rules discussed are current as of the date of publication and may not apply in future years.
Brooke Ramstad
Brooke Ramstad is a Senior Financial Advisor at BR Wealth Management, where she helps individuals and business owners navigate the complexities of financial planning with clarity and confidence. Known for her personalized, strategic approach, Brooke specializes in comprehensive wealth management with a focus on retirement planning and business exit strategies.